Contributed by Lim Jing Wei, Chief Fintech Officer
In the previous article titled Electronic Settlement Speeds Up Reconciliation Process dated 22 May 2023, we mentioned about Singapore initiative of achieving a cheque-free society.
In an endeavor to propel Singapore towards a cheque-free society, the Monetary Authority of Singapore (MAS), the country's central bank and integrated financial regulator, made a momentous announcement on 28 July 2023. As part of this initiative, all corporate cheques, including non-SGD denominated cheques, will be phased out by the end of 2025, while individuals will still have the option to use cheques for a limited period following 2025. With a steady decline in cheque usage in Singapore, the costs associated with cheque processing, including clearing expenses and other operational overheads, have risen. To address this, banks will implement charges for Singapore Dollar (SGD)-denominated cheques, effective from 1 November 2023.
Collaborating closely with The Association of Banks in Singapore (ABS), along with other stakeholders from the financial industry and government agencies, MAS is driving a comprehensive set of initiatives aimed at facilitating a seamless transition for cheque users towards embracing e-payment solutions. One such measure includes the introduction of a dedicated e-payment solution as a viable alternative for post-dated cheques, offering enhanced convenience to both corporate entities and individuals.
The adoption of e-payments in Singapore has seen remarkable growth, with the annual cheque transaction volume declining by nearly 70% from 61 million in 2016 to less than 19 million in 2022. As the usage of e-payments continues to surge among businesses and individuals, the fixed cost incurred in cheque clearing has resulted in a quadrupled average clearing cost since 2016, reaching $0.40 in 2021. In light of these trends, most banks have been subsidizing cheque processing costs. However, with a projected further 70% reduction in cheque volumes by 2025, the cost of clearing a cheque is anticipated to escalate to between $2.00 and $6.00. This significant increase renders subsidization unsustainable, leading banks to pass on the cost of cheque processing to their customers.
MAS and ABS jointly urge all cheque users to embrace alternative payment methods as the industry prepares to retire the Cheque Truncation System (CTS). This collective effort aligns with Singapore's Smart Nation vision, where accessible, swift, and secure payment solutions cater to every individual's needs.
At CYS Global Remit, we recognize the numerous benefits and cost savings associated with digital payments. Embracing the digital transformation journey is a proactive step that aligns with Singapore's progressive drive towards an efficient, secure, and cheque-free payment ecosystem.